Preparation of documents on transfer pricing

Preparation of the documents on transfer pricing has the following stages:

Stage 1. General analysis of the transactions and parties to the transaction:

• General analysis of the controlled transactions; analysis of the parties to the controlled transactions, analysis of the group of companies containing the parties to the controlled transactions;
• Analysis of the market, where the company operates;
• Analysis of the economic circumstances’ influence on the controlled transactions;
• Analysis of the comparable transactions, carried out by one of the parties to the controlled transactions with the entities, which are not considered to be associated (if available);
• Analysis of the transaction pricing procedure, discounting procedure, provision of bonuses etc., analysis of the factors, which influenced pricing.

Preparation of the documents on transfer pricing is done in accordance with the Tax Code of Ukraine, Resolutions of the Cabinet of Ministers of Ukraine and other regulations, taking into account provisions of the OECD Transfer Pricing Guidelines and UN Practical Manual of Transfer Pricing.

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Stage 2. Functional analysis and development of the methodological approach to the economic analysis:

• Distribution analysis of functions, assets and risks between the parties to the controlled transactions;
• Identification of the party to the controlled transaction for the economic analysis;
• Selection of the transfer pricing method for the economic analysis;
• Identification of the time period, information sources and comparability criteria for the economic analysis.

Stage 3. Economic analysis

• Analysis of the controlled transactions price compliance with the arm’s-length principle;
• Analysis of the controlled operations profitability (in case of usage of resale price method, cost plus method, transactional net margin method);
• Performance of benchmarking, also with application of information data basis from Bureau Van Dijk;
• Identification of market profitability range.